Foreclosures Surge in Subprime Market!!!!!

I thought things were looking up for the Subprime market. They did say things were getting better, now this news comes out. I guess with the dow near record highs it doesnt matter what the real estate market does.

Also, after looking at the retail sales yesterday, the consumer continues to spend, it seems nothing can stop the good old consumer. Spend, Spend, Spend.

WASHINGTON (AP) -- Late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit histories spiked to all-time highs in the first three months of this year.

The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Thursday, reported that the percentage of payments that were 30 or more days past due for "subprime" adjustable-rate home mortgages jumped to 15.75 percent in the January-to-March quarter.

That was a sizable increase from the prior quarter's delinquency rate of 14.44 percent and was the highest on record, the association's chief economist Doug Duncan said in an interview with The Associated Press.

People who have taken out subprime mortgages, especially adjustable-rate loans, have been clobbered as rising interest rates and weak home prices have made it increasingly difficult for them to keep up with their monthly payments. Lenders in the subprime market have been hard hit, with some being forced out of business.

The percentage of subprime adjustable-rate mortgages that started the foreclosure process in the first quarter of this year climbed to 3.23 percent. That was up from 2.70 percent in the final quarter of 2006 and was the higest on record, Duncan said.

Federal Reserve Chairman Ben Bernanke, in a speech last week, predicted there will be further increases in delinquencies and foreclosures this year and next as interest rates on many subprime adjustable-rate loans will go up as they reset.

Some analysts estimate that nearly 2 million adjustable-rate mortgages will reset to higher rates this year and next.

However, Bernanke said it was unlikely that troubles in the subprime mortgage market would seriously spill over to the broader economy or the financial system.

Loose lending standards, including allowing borrowers to get mortgages with little documentation, contributed to problems in the subprime market, Bernanke said. Congress is looking into possible action. Bernanke, meanwhile, has said the Fed will consider tougher rules to curb abusive practices and improve disclosure. The Fed was holding a public hearing Thursday on the matter.

For all mortgages, the deliquency rate actually dipped to 4.84 percent in the first quarter, an improvement from the fourth quarter's rate of 4.95 percent, which had marked a 3 1/2 year high. However, the number of all mortgages starting the foreclosure process in the first quarter rose to a record high of 0.58 percent. That surpassed the previous high of 0.54 percent in the final quarter of 2006.

The association's survey covers a total of nearly 44 million loans nationwide.

Wall Street was jarred when the association's previous report in March showed that late mortgage payments shot up to a 3 1/2 year high and new foreclosures surged to record levels in the final quarter of last year. The Dow Jones industrials tumbled that day nearly 243 points.

The subprime meltdown began in February, when New Century Financial Corp. and HSBC Holdings reported more borrowers missing payments. The spike in bad loans scared banks and investors away from risky debt, drying up much of the industry's financing. More than 30 subprime lenders, including New Century, have gone bankrupt this year.